More on valuations

I shed a little more light on the rising valuations at startup companies in this column, which includes comments from three Seattle area venture capitalists.

Madrona’s Greg Gottesman — for one — said that valuations for some later-stage companies have gotten too high. But he doesn’t think VCs will repeat the mistakes of the past when they overvalued money-losing Internet companies.

“A lot of us have been to the depths of the valley, and we remember what it felt like when we were there,” Gottesman said. “We are not going to go there again.”

Maybe so. But that doesn’t explain why VCs are investing in startup companies that already have four or five venture-backed competitors — something I saw during the dot com boom of the late 90s and something that is occurring once again. (Well-funded Seattle area startups such as Judy’s Book and Medio Systems, for example, already have plenty of competition).

Rustic Canyon Partners’ Jon Staenberg said he is concerned about the “me-too” companies being formed in certain sectors. He said the world didn’t need five or six online pet food stores during the late 1990s and it probably doesn’t need five or six social networking companies today.

Some carnage will occur.

And that’s always been part of the venture capital game. The key is placing bets on the smart teams who can possibly build a better mousetrap or figure out a new business model. Google — remember — was not the first search engine. It was just the first to crack the code on the money-making machine around online advertising.

More on valuations

I shed a little more light on the rising valuations at startup companies in this column, which includes comments from three Seattle area venture capitalists.

Madrona’s Greg Gottesman — for one — said that valuations for some later-stage companies have gotten too high. But he doesn’t think VCs will repeat the mistakes of the past when they overvalued money-losing Internet companies.

“A lot of us have been to the depths of the valley, and we remember what it felt like when we were there,” Gottesman said. “We are not going to go there again.”

Maybe so. But that doesn’t explain why VCs are investing in startup companies that already have four or five venture-backed competitors — something I saw during the dot com boom of the late 90s and something that is occurring once again. (Well-funded Seattle area startups such as Judy’s Book and Medio Systems, for example, already have plenty of competition).

Rustic Canyon Partners’ Jon Staenberg said he is concerned about the “me-too” companies being formed in certain sectors. He said the world didn’t need five or six online pet food stores during the late 1990s and it probably doesn’t need five or six social networking companies today.

Some carnage will occur.

And that’s always been part of the venture capital game. The key is placing bets on the smart teams who can possibly build a better mousetrap or figure out a new business model. Google — remember — was not the first search engine. It was just the first to crack the code on the money-making machine around online advertising.